The UK’s Payment Systems Regulator (PSR) has just announced a public consultation on whether Bacs should be required to change its Direct Debit rules.

Currently, organisations not sponsored by a Bacs member can use Direct Debit providers/bureaus to maintain Direct Debit payments on their behalf. This includes providers that manage the money flows, as well as the setting up of the Direct Debits themselves (known as FM providers, of which GoCardless is one).

Under current rules, an organisation can request that an outgoing FM provider transfers over all existing Direct Debit mandates to a new provider, known as the bulk change process, but the outgoing FM provider is under no obligation to meet that request.

After almost two years of lobbying, our regulator (the PSR, part of the FCA) has drawn a number of preliminary conclusions, and has set out its intention to require Bacs to implement a rule change. This will ensure bulk changes can’t be blocked by outgoing providers.

Why are bulk changes refused?

Some Direct Debit providers won’t allow their customers to bulk change to GoCardless - for no good reason. This is bad for merchants, their customers, and the industry as a whole. Since late 2015, our legal team, armed with evidence and insights from our customers and support team, has been working hard to bring this unfair and anti-competitive practice to an end.

PSR public consultation

GoCardless initially raised the issue with the aforementioned providers, but with no luck. Having pursued the issue as far as possible with our sponsor bank, and Bacs themselves, we turned to the regulator. We first wrote to the Payment Systems Regulator in early 2016, setting out the issue, and our view of the impact on the payments ecosystem. That was followed by a series of meetings with the PSR and consultations by Bacs.

The PSR can require Bacs to implement a change to the scheme rules if it deems a change necessary to further the PSR's purposes: to promote the interests of users, to promote competition, and to promote innovation.

Therefore, following our meetings, we wrote a second letter to the PSR, asking them to consider requiring Bacs to implement a new rule for the Direct Debit scheme. This would make using the bulk change process mandatory if requested by the incoming Direct Debit provider, and the FM provider client (i.e. the merchant).

Changing the rules around switching

The result of this is the PSR's public consultation on switching Direct Debit FM provider. In summary, the PSR has provisionally agreed that the current regulations are unfair and inappropriate, and is looking to require Bacs to change the rules. This change will require existing Direct Debit FM provider to use the bulk change process unless certain exceptions apply.

We would urge all affected businesses, customers and Direct Debit providers to read and respond to the consultation. If you as a merchant experience any issues when trying to switch away from your current Direct Debit provider, please contact the PSR here.

Our view

"We believe that every business should be able to choose and move between payment providers freely. In fact, a process to enable efficient switching has existed for some time,” said our head of legal, Ahmed Badr.

“Unfortunately, we’ve encountered multiple instances of Direct Debit providers exploiting a loophole in the scheme rules that allows them to effectively prevent clients switching to a new provider.” he continued.

“This leaves clients stuck using a less than ideal service against their will, stifling competition and innovation in the process.

"At GoCardless, we see no justification for these exploitative practices and fundamentally believe they shouldn’t be allowed. In 2017, business customers expect the same choice and freedom of movement as they have in their personal banking lives.

"We took this issue up with the PSR almost two years ago, so are happy to see them publishing a public consultation. We urge all affected businesses, customers and direct debit providers to read and respond to it."

Our commitment

We commit in our Merchant Agreement, and have done for some time, to helping you - our customers, switch providers, including through the use of the bulk change process, if you choose to do so. We're confident you won't want to.

In the first of a short series of GoCardless sponsored blog articles (by MemberWise Network Founder, Richard Gott) we investigate why your website is key to improving new member acquisition and retention.

In an increasingly virtual world many prospective new members will find out about your organisation either by searching for and/or visiting your organisation’s website direct. It will almost certainly be their gateway into membership. Let’s consider what might be on their minds when they visit your website:

This membership organisation may be of interest to me

I want to find out more now

I expect to see a clear online and offline member value proposition (MVP)

If I see value I want to join online now and I want immediate access to content

If I don’t see value I will either seek an alternative or I won't bother

For many organisations, this critical online membership journey needs optimising and, for many, has not been sufficiently considered/mapped.

Call to action 1 - Has the online joining journey been truly optimised?

In the first instance it might be helpful to consider your website as a shop. The shop needs to have a window and prospective shoppers (prospective members) need to be tempted inside via rich content, effective hooks, incentives and clear, intuitive navigation.

The shop door (online joining/payment processing) needs to be open and once inside (following successful online joining) the shelves need to be well-stocked (i.e. content should be interesting and immediately accessible).

From member outputs (benefits) to positive outcomes

Many organisations use practical case studies to enable prospective members to establish the value of membership. These case studies ordinarily mirror key member personas and are much more powerful than listing member benefits alone (member outputs). The key is to clearly communicate one or more positive member outcomes. This membership marketing approach is much stronger.

Case study: The Caravan and Motorhome Club

In 2017 the Caravan Club rebranded to The Caravan and Motorhome Club and underwent a radical change, shifting from member outputs (benefits) to outcomes. As an organisation it went from ‘we are a club for people who own caravans’ to ‘we are a club that enables our members to go on adventures’. This powerful approach will impact positively on new member acquisition.

Consider the online joining process and opt-out payment options

The online joining process should be simple and straightforward. It requires clear instructions and a growing number of membership organisations are using illustrations/videos/images to prospective members to join.

Two thirds of membership organisations have their websites connected directly to their CRM (membership database) and this can help massively with the online joining process/administration. It can also be the reason why online joining journeys for some organisations can be clunky and unintuitive. In real terms this will impact on the number of abandonments and you need to actively work to reduce these.

A number of membership organisations are now providing live web-chat functionality that can be accessed by the joiner at any stage of the online joining process. Some organisations are now actively tracking online joiner behaviour. For example, if the user starts to move their mouse to the top-left of the screen relatively quickly this may indicate a potential exit (I.e. pre-empting the browser screen being closed) and so ‘Can we help?’ is displayed. Similar content may also be displayed if there is a level of inactivity on an online joining page/form.

Critical to the online joining process is online payment functionality and it is now industry-standard for the joiner to have the option to pay either via debit/credit card, Direct Debit or offline via invoice.

Opt-out membership subscription payment options will massively help existing member acquisition, so this option should be provided as ‘the way to pay’. Many organisations also provide the opportunity for members to pay in recurring monthly/quarterly payments.

I hope you found this article interesting - and I look forward to sharing my second blog article on futureproofing your membership organisation. Watch this space…

GoCardless is bringing Direct Debit into the digital age, offering our professional membership organisations a streamlined and fully-automated payments service. With GoCardless you can set up new members online within minutes - leaving them to fully enjoy the benefits of your organisation hassle-free.

What’s more, across the country, small businesses are suffering under the weight of £14.2 billion in combined unpaid invoices. The situation may seem dire, but was even worse five years ago, when that figure stood at over 30 billion.

So what’s the effect of this mountain of debt on daily operations for SMEs? For starters, those late payments must be chased. This leads to a great deal of time and money wasted in the process of chasing.

The numbers paint a clear picture: 39% of SMEs spend up to four hours a week chasing late payers, while 12% employ someone specifically to pursue outstanding invoices.

It gets worse. According to the Bacs research, almost one in five SMEs affected by overdue payments admit that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy. 7% say they’re already facing the danger zone.

16% of those facing late payments struggle to pay their staff on time, while 28% of company directors have had to reduce their own salaries to keep essential working capital inside their businesses.

Nearly a third say that overdue invoices compel them to delay paying their own suppliers, which perpetuates the late payment culture. Meanwhile a quarter of businesses rely on bank overdrafts to make essential payments, while 15% have trouble paying essential business bills, such as utilities and rent.

Late payments don’t just block cash flow for small businesses; but also jeopardise the long-term security and capital needed to grow and evolve.

Customers pay late for reasons ranging from pure forgetfulness to their own cash flow issues, and everything inbetween. But no matter why, the end result is the same: businesses don’t get paid on time.

Rather than cajoling, pleading and persuading customers to pay on time, it makes much better sense for businesses to simply put in place automated systems. These remove the pain of late payments, making the entire process streamlined and hassle-free - both for businesses and their customers. This is what GoCardless does best.

By encouraging customers to set up automatic payments by Direct Debit, businesses can ensure no more missed payments, keeping their cash flow in good shape. GoCardless uses technology to level the playing field, offering businesses of all sizes the benefits of Direct Debit, the UK’s most reliable payment system.

“Falling late payment totals is welcome news for small to medium size businesses and for the wider economy. It’s good to hear that relatively simple measures like collecting money by Direct Debit are helping to keep SMEs out of the late payments trap,” Mike Hutchinson of Bacs told Business Matters magazine.

“We’d advise all businesses to investigate if automated payments can help them control their cashflow more effectively.”

Growing numbers of the UK’s small businesses are using GoCardless to solve the late payments problem. In the process, they are helping to challenge the existing late payment culture that affects so many SMEs every year.

“The biggest benefit of GoCardless has been time saved chasing up customers who’ve not paid. I was spending several hours a week on the phone, or sending out polite chaser emails to clients. That time tends to stop you being efficient,” said Barbara Gaunt of FD Works, a Bristol-based accountancy firm.

And using GoCardless is sure to give a substantial boost to cash flow, as the story of Has Bean Coffee shows. After switching to GoCardless, the company reduced its average invoice payment period from 62 days to 41, while improving cash flow by a whopping 30%.

Because of significant budget cuts, many councils have started looking elsewhere for sources of revenue. Some are now charging for discretionary services, while others are adding completely new services to their offerings.

Alongside our partners Peterborough City Council, we spoke to councils from all over the country, including officers, councillors and leaders of the opposition. Here are some of the key takeaways about councils’ approach to digital improvements.

More efficiency, less spend

In general, councils want to save money by addressing three areas. Firstly, councils aim to get more done with less manual work, using technology to improve processes. They also want to cut back on physical mailing and reduce paperwork in general.

And finally, streamlining back-office processes is key for many councils in their drive to save money and heighten efficiency across the board.

For payment handling needs, GoCardless is well placed to help councils meet all these goals. Using our digital Direct Debit mandates allows customers to sign up online instead of by phone or paper mandate. Our system also removes the need to manually reconcile council payments, making the back office payment handling process slick and efficient.

“GoCardless helped us to set up an online Direct Debit solution in a matter of weeks. The API was really easy to work with and it saved us having to invest in a bespoke solution that would have taken a number of months to introduce.

“We’ve seen around 60% of our customers chose to pay by Direct Debit so next year they won’t have to spend time renewing their subscriptions. It’ll all be taken care of for them,” said Lee Sirdifield, strategic lead of programme delivery for South Kesteven District Council.

Lessons from the private sector

We also discovered some councils going the extra mile in their drive to maximise efficiency. Some have begun taking tips from the private sector; in particular, teaming up with companies to deliver strategic governing priorities in new and innovative ways.

For example, Peterborough City Council partners with a range of companies, such as Arcus Global for a suite of services, Peopletoo for customer journey mapping, and of course GoCardless for payments.

Peterborough Council already has a digital strategy in place, working with the private sector to bring in new technology to both benefit residents and improve the way its officers work. For example, Peterborough has now moved to Google's cloud-based applications and has become much more agile by adopting Chromebooks.

By partnering with GoCardless, Peterborough was able to implement a reliable, accessible and easy-to-manage way to collect payments from residents for its newly introduced garden waste collection charge. And by introducing the charge the council was able to cover the £800,000 annual cost of delivering the garden waste service.

Peterborough identified Direct Debit as the most suitable way to collect payments, and GoCardless offered easy integration along with real value for money.

“GoCardless was easy to integrate into our online subscription service, and offered value for money for taking multiple payments,” said James Collingridge, partnership manager at Peterborough City Council.

New ways of revenue generation

Over in Camden, we can see a particularly enterprising example of a council emulating the private sector. Alongside other digital transformations, Camden Council is now acting as a marketing agency for other councils, producing print and digital media for them.

The council’s USP is having these cutting-edge digital skills alongside the in-depth knowledge of delivering council services, to understand what a council really needs.

Camden Council aims for this endeavour to not just become self-financing, but also to create a brand new revenue source. At present, Camden’s clients include other councils from all over the UK, such as Havering Council in Essex.

On top of its digital marketing efforts, Camden Council is already generating significant revenue by renting out spaces, for example for film shoots taking place in the borough. It has also developed new policy to allow digital advertising in the borough, to allow buildings and others to monetise space.

Tackling integration challenges

But there are a number of challenges remaining in the drive towards full digital. One of them is the need to consider how digital tools fit in with existing systems, as Councillor Theo Blackwell pointed out in a recent Medium post.

“Legacy systems create a large technical burden when launching and integrating new tools. There’s an opportunity now to rationalise these systems and applications and identify new opportunities through ongoing systems-thinking reviews of each service.”

With our flexible system, built with a powerful API at its heart, councils can integrate our product easily and quickly with existing systems, without having to reinvent the wheel. Overall, the area of payments is ripe for improvement, with Direct Debit and GoCardless leading the way.

Councils are taking a forward-looking approach with their digital first strategies, which closely mirrors our philosophy here at GoCardless, as we work hard to bring Direct Debit into the digital age.

Direct Debit use in the UK grew by 4.9% in 2016 - but how can we make it even more popular?

Direct Debit has been growing fast over the last few years. Today in the UK, over 90% of personal current account holders and around 40,000 organisations use it - and it’s the most popular way for UK consumers to pay their bills. Recent figures show that 9 out of 10 adults have at least one active Direct Debit and pay around 73% of their household bills this way.

Bacs, (short for Bacs Payment Schemes Limited), the organisation behind Direct Debit, processed over 6 billion transactions in 2015 to a value of £4.6 trillion. This figure included an impressive 3.9 billion Direct Debit payments, an increase of 239 million on the previous year.

But despite the popularity of Direct Debit, there remain areas for improvement. Bacs has conducted research into the current state of Direct Debit, to ensure the product remained ‘relevant and fit for purpose’.

Here at GoCardless, part of our job is educate businesses about the benefits of Direct Debit, so we were keen to understand these insights from Bacs. In this post, we explore some of the issues unearthed in the research, and examine ways to address them.

The consumer view

For consumers, the Direct Debit Guarantee is a key feature giving them confidence and trust in the system. The Guarantee (also known as the ‘Direct Debit Indemnity’) is a method of customer protection built into the Direct Debit scheme. It protects customers against payments made in error or fraudulently, making Direct Debit the UK’s safest payment method.

According to the Bacs research, more than half of consumers surveyed (57%) said they were aware of the Guarantee. But younger and less financially secure individuals are less likely to be aware of it. Over a quarter of consumers said they didn’t know how long the Guarantee was valid for, with a third believing it to be valid for a year or less.

It’s important to convey that the Guarantee is unlimited, as this helps consumers feel more secure in using Direct Debit. Educating consumers about the Direct Debit Guarantee could be the key to building their confidence and encouraging them to pay by Direct Debit.

What’s more, users with less knowledge of Direct Debit are more likely to think money can be taken from their account at any time, without warning. This audience said they would like to be notified when Direct Debit payments are set to leave their account, but didn’t realise that Direct Debit providers are already obliged to inform them of this.

The business view

As far as SMEs are concerned, the research found that only 3% pay their bills by Direct Debit (compared to 73% of consumers). Possible reasons may include the traditional struggle for B2B suppliers to offer Direct Debit as a payment method (due to challenging access requirements from the banks), along with consumers’ tendency to be ahead of the curve in cloud adoption, plus the late payments culture in British business.

For SMEs, perceptions about the Direct Debit chargeback rate have been largely inaccurate, with figures showing consumers charging back less than one in every 4000 Direct Debit payments. What’s more, it’s fraudulent to falsely charge back payments. Awareness of this is important for setting small business owners’ minds at ease and making them more likely to use Direct Debit to take payments from their customers.

Improving Direct Debit for all

For many people, Direct Debit is a trusted payment method due to the Guarantee.

But this research has uncovered opportunities to improve understanding: both among consumers so they’re more willing to pay by Direct Debit, and among businesses so they are more comfortable in offering it. In turn, this points to an opportunity for Direct Debit growth in both B2C and B2B, leading to improved cash flow for everyone.

Having brought Direct Debit into the digital age, GoCardless is well-placed to deliver further improvements, as well as helping to educate consumers about the many benefits of taking payments by Direct Debit.

Open banking is one of the most important emerging trends in the world of finance today.

It involves using technology to transform the financial services industry, levelling the playing field and giving consumers more control of their data.

This all stems from the introduction of PSD2...a term that may already sound familiar. PSD2 is short for the ‘Payment Services Directive 2’ and was designed as a pan-EU project, involving a range of countries within the bloc.

Together, PSD2 and open banking are gearing up to revolutionise the payments industry. The new directive is likely to affect everything from how we pay online, to the information we see when making a payment.

As part of this change, banks will be required to offer open APIs to allow third party developers to build apps around various elements of the financial services industry.

Fintech companies and other innovators will have the chance to leverage data in ways that benefit the customer.

But in reality, Open Banking is about more than APIs…

We believe technology has the power to unify and simplify finance.

That’s why GoCardless is launching an Open Banking Hub. Our goal with this platform is to disseminate insightful and informative content to help our audiences better understand the many benefits of open banking, for both their firms and their customers.

The GoCardless Open Banking Hub will also be useful for keeping track of how the open banking trend will impact us all. For busy senior executives in the financial services industry, projects such as implementing PSD2 requirements can become just another sprawling management concern.

Success of those projects hinges on how well you serve your customer. Everything published on the Open Banking Hub will be written with that philosophy firmly in mind.

The Hub will aim to provide some all-important context for understanding open banking. To do that, we’ve created a
comprehensive timeline of the PSD2 project.

What’s more, the open banking revolution is full of acronyms and complex terms. To help you navigate this new world with ease, we’ve created one of the first open banking glossaries, which we’ll continue to update as new terms emerge.

Our Hub will feature a wide range of content, including interviews with key stakeholders — banks, investors, industries around the world, along with summaries, news and reviews of key events and announcements, plus deep dives into the various technology that’s driving the open banking revolution.

In addition, the Hub will offer a range of expert insights into how the latest developments in regulation and compliance are being shaped, and how organisations can use them to gain a competitive edge.

We’ll be talking to everyone from investors and entrepreneurs to industry organisations, in a bid to uncover how open banking will impact the financial services industry and beyond.

Freedom was the overarching theme for Subscribed this year. Discussions revolved around the move from a world where customers bought products to a world where subscriptions to services offer maximum freedom for the end-customer.

In this turbulent era of market uncertainty, political changes and new economic powerhouses, what might London’s future place in the global tech scene look like? And how do those who are funding London’s hottest tech innovators view the capital’s role in changing times? Where better to seek answers to these big questions than at an event full of angel investors, VCs and world-leading entrepreneurs? We attended the Tech London Advocates Investor Showcase this week at Here East hoping to learn more.

For those looking to transform and revitalise their accountancy practice, Accountex 2017 was the place to be this May. Held at the ExCel centre in London’s Docklands, the cream of the UK’s accounting world came together to discuss everything from the latest tech to the future of the industry.

What did you miss? In short, one very simple buzzword featured heavily across all the presentations, panels and exhibitor stands at this year’s event...

Here we outline five simple ways to increase the take up of Direct Debit among your customers. Following these best practices can mean a huge difference in take up rates - anything between 10% and 100% increase!

GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009, registration number 597190, for the provision of payment services.

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